Singapore vs. Hong Kong: Battle for Asia’s Financial Hub

With a population of over 4 billion and growing, things happening in Asia will increasingly shape the rest of the world. But not all countries will benefit equally. The region’s financial hubs will facilitate the flow of capital as more money is made and invested throughout Asia.

Singapore and Hong Kong are arguably the biggest contenders for the title of Asia’s main financial center. The rivalry between them can be intense at times.

It’s easy to see why because the two cities have many things in common with each other. Both are the gateways between their region and the rest of the world (Singapore for ASEAN, Hong Kong for Mainland China). Both lure in an immense amount of FDI too.

Singapore has the busiest container port in the world by some measures. The Port of Hong Kong held this title not long ago.

Hong Kong and Singapore are doing many things right and continuously score near the top of several rankings. Singapore placed first in The World Bank’s Ease of Doing Business Index since 2006, while Hong Kong has been in the top four since 2007.

Similarly, and despite their small sizes, each is home to one of the world’s top five busiest container ports.

The total value of Singaporean exports is higher than any other country in Southeast Asia. This is despite being the smallest in the region. Much of this is because of re-exporting, and high value products such as refined petroleum and pharmaceuticals.

Which is Best for Banking and Asset Management?

You can’t be a financial center without excellent banks, market-makers, and other financial institutions, and neither Singapore nor Hong Kong disappoint. A yearly report by Bloomberg lists Hang Seng Bank, one of Hong Kong’s largest, as the most well-capitalized bank in the world.

Singapore and Hong Kong combined have only around 0.5% percent of the world’s population. But each grabbed two spots on the list and claimed four out of the top ten strongest banks. The entire continent of Europe only has three, while all of Asia has six.

Along with stable banks and transparent legal systems, tons of foreign capital has flown into Hong Kong and Singapore because of low taxes – sometimes even too much.

If structured correctly, an offshore company in Hong Kong or Singapore can pay zero percent tax if they aren’t serving local customers. If they are, tax is still very low for both individuals and corporations at under 20% in the highest bracket.

Neither jurisdiction has estate or capital gains tax, making both a great choice for investors or wealthy retirees.

Singapore vs. Hong Kong? There May Not Even Be a Fight

Both Hong Kong and Singapore are obviously doing things very well, but their similarities lead many to wonder if one is a better place to invest and conduct business in. Some people even say one will even overwhelm the other and make it obsolete over the long term.

There’s no easy answer to this question. It depends on what you’re looking for. For example, Singapore is a hub for entrepreneurship. It’s easier to navigate for venture capital firms, and safer for a risky investment in a new company.

Hong Kong, on the other hand, specializes in investment and finance. A new link with the Shanghai Stock Exchange along with a larger presence of multinational banks, brokerages and other financial institutions, give it an edge over Singapore.

It doesn’t stop there. Singapore is best at wealth management, Hong Kong at investment banking. Singapore for Forex, Hong Kong for equities.

It’s much more likely that the two jurisdictions will complement each other – similar to the way London and Frankfurt do – than for one to “win” over the other.

Regardless, the world is watching the fight of Singapore vs. Hong Kong. They’re perfect examples of Asia’s rise as a whole.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.